Auto components to lose out to Mexico
While the US has imposed tariffs on auto and some auto parts, there is a temporary exemption for imports of automobile parts that qualify under the USMCA’s preferential duty treatment rules;
Chennai: Auto component industry seems to be the biggest loser in the US tariff war as the industry will lose out to its larger opponent Mexico, which is currently facing no reciprocal tariffs.
While the US has imposed tariffs on auto and some auto parts, there is a temporary exemption for imports of automobile parts that qualify under the USMCA’s preferential duty treatment rules.
Mexico is one among the countries that is a party to the USMCA preferential trade agreement. Mexico is not facing reciprocal tariffs either. Mexico is the largest supplier of auto components to the US. The US imported $89 billion worth of auto parts globally last year, with Mexico accounting for $36 billion and China for $10.1 billion.
India exported $6.79 billion worth of auto components to the US while imports were $1.4 billion. In FY2024, the combined turnover of the auto component industry stood at $74.1 billion with $21.2 billion in exports and US exports was almost 30 per cent of the total exports.
Mexico can provide auto components to the US at a competitive price. Auto component makers shifting to Mexico for cost advantage and proximity cannot be ruled out.
However, Indian industry hopes that the US will take a decision on the tariffs on USMCA countries soon.
The USMCA tariff exemption will remain in place until the Department of Commerce and US Customs and Border Protection (CBP) establish a process by which the 25 per cent tariff can be applied only to the non-US content of USMCA automobile parts imports. Under this prospective process, companies importing automobile parts under USMCA would be able to certify their products’ US content and only pay the tariff on the non-US content. However, the timeline for the development of this process currently looks uncertain.
“ACMA remains hopeful that the ongoing bilateral negotiations between the Indian and US governments will lead to a balanced resolution that benefits both economies. We believe that the strong trade relationship between India and the United States, especially in the auto components sector, will encourage continued dialogue to mitigate the impacts of these measures,” said Shradha Suri Marwah, President ACMA.